Page 124 - CA Inter Audit PARAM

CA Ravi Taori

QNO Objective with respect to Opening Balances Old Course -- (SM17/SM20/SM21/M23R)
510.01 Bhaskar CNO SA510.020 New Course – (SM25)
Discuss the objective of Auditor with respect to Opening balances – in conducting an initial audit
engagement.
OR

M/s PQR and associates are the statutory auditors of TUV Ltd. for the FY 2020- 21-. They have been
appointed as statutory auditors of TUV Ltd. for the first time. What is the objective of the engagement
partner in terms of SA 510?
Answer ➢ Objective
In conducting an initial audit engagement, the objective of the auditor with respect to opening
balances is to obtain sufficient appropriate audit evidence about whether:

Opening balances contain misstatements that materially affect the current period’s financial
statements; and
Appropriate accounting policies reflected in the opening balances have been consistently
applied in the current period’s financial statements or changes thereto are properly
accounted for and adequately presented and disclosed in accordance with the applicable
financial reporting framework.

Audit Procedures for Opening Balance Old Course -- (M17E/N17R/N18M/N19M/M19R/
QNO Bhaskar CNO SA510.020/SA510.060 N18E/SM20/SM21/M22E/M23M)
510.03
New Course – (SM25/M24R)
M/s Pankaj & Associates, Chartered Accountants, have been appointed as an auditor of ABC Limited. CA
Pankaj did not apply any audit procedures regarding opening balances. He argued that since financial
statements were audited by the predecessor auditor therefore he is not required to verify them. Is CA
Pankaj correct in his approach?
OR

Discuss with reference to SA 510, “Initial Audit Engagement – Opening Balances”, the procedures the
auditor should undertake in respect of opening balances for a new audit engagement.
OR
Explain Audit Procedures in respect of Opening Balances for a New Audit Engagements with reference to
relevant SA.
Answer ➢ Applicability
This Standard on Auditing (SA) deals with the auditor’s responsibilities relating to opening
balances when conducting an initial audit engagement.
• The financial statements for the prior period were not audited; or
• The financial statements for the prior period were audited by a predecessor auditor.

➢ Audit Procedures
The auditor shall read the most recent financial statements, if any, and the predecessor
auditor’s report thereon, if any, for information relevant to opening balances, including
disclosures.
The auditor shall obtain sufficient appropriate audit evidence about whether the opening
balances contain misstatements that materially affect the current period’s financial
statements by:
• Determining whether the prior period’s closing balances have been correctly
brought forward to the current period or, when appropriate, any adjustments have
been disclosed as prior period items in the current year’s Statement of Profit and
Loss;
• Determining whether the opening balances reflect the application of appropriate
accounting policies; and
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